After much anticipation, iron ore prices of US$200 a tonne and three lockdowns, Mark McGowan has delivered his first State Budget in his dual role as Premier and Treasurer of Western Australia.
Termed the ‘record-breaking’ Budget surplus, the McGowan government has confirmed an operating surplus of $5.6 billion for the 2020-21 year and an estimated surplus forecast of $2.8 billion for the 2021-22 year, concreting Western Australia’s position as the only state to record a surplus during the COVID-19 crisis. In addition, the WA economy’s growth is estimated to have grown 3.25% in the 2021-22 year with a forecast of growing an additional 3.5% in 2021-22 year (1.4% in 2019-20) being the fastest rate of growth since 2013-14.
It is important to note that public sector net debt is forecast to remain ‘flat’ at approximately 11.5% of Gross State Product.
Throughout the period, there has been much focus on the current social housing situation in WA with 17,000 people on the public housing waiting list and WA’s overloaded health system with ambulance ramping at record rates.
Budget highlights and priorities
The Budget has confirmed the McGowan Government’s commitment and continued response to COVID-19 and highlights the current priorities of the state, being:
- A $1.9 billion investment in the WA's health and mental health systems;
- A $750 million package of climate action initiatives;
- Creation of a $750 million Social Housing Investment Fund and a $500 million Digital Capability Fund;
- Investment of $400 million towards the Westport project and;
- Additional expenditure to support economic development and jobs creation including $120 million to speed up project approvals and $100 million to establish an Investment Attraction and New Industries Fund.
In addition to the above, the McGowan Government has also highlighted:
- The Government’s Asset Investment Program totals a record $30.7 billion over the next four years including building critical infrastructure for the future and supporting local jobs with an estimated $9,1 billion going towards regional infrastructure;
- $4.4 million has been set aside to pre-fund future ‘strategic’ infrastructure including $1.8 billion for a new women and Babies Hospital and $1.4 billion for the state’s next desalination plant.
Finally, as a result of the above priorities, employment is anticipated to grow by 34,000 additional jobs in 2021-22 with the unemployment rate forecast to fall to 4.5% by 2022-23 noting that this is well below the decade-average employment rate of 5.5%.
The prospect of a large COVID-19 outbreak and prolonged lockdown still remains a key risk and area of concern which will be combated by a $1 billion commitment to quarantine, building bonus scheme, small business lockdown assistance grants and police emergency response.
Noting the wide publication of the housing and motor vehicle boom in WA, state taxation revenue increased 11.7% equating to approximately $1.1 billion.
Following the COVID-19 payroll tax stimulus, and as a result of the current labour market conditions, there has been a corresponding increase in payroll tax collections. This is forecast to increase an additional 8.4% ($314 million) in 2021-22 (2.9% in 2020-21).
Total transfer duty revenue collections in respect of property acquisitions and motor vehicle acquisitions increased 57.9% (being $770 million) and 37% (being $139 million) respectively in 2020-21.
Going forward, taxation revenue is forecast to continue to lift over the next three years to 2024-25 reflecting a 2.4% per annum growth.
Key measures at a glance
Following a review of the Budget papers, we have set out an assessment of the current situation below and highlight the key measures:
From a finance perspective:
- $1.5 million extension of the Aboriginal Business Capability Building program
- $136 million allocation to the extension of the Building Bonus Grant Scheme
- Extension of the Off-the-Plan Duty Rebate Scheme to October 2023 at a reduced rate of 50% of duty paid to a maximum rebate of $50,000 (previously 75% rebate to a maximum of $50,000)
- Small Business and Charities Electricity Credit Scheme
- Land Tax Disaster Relief and land tax exemption for eligible properties destroyed by the Wooroloo bushfire and Cyclone Serjoa disasters
Jobs, tourism, science and innovation
- Allocation of $100 million over FY22 to FY25 to establish an Investment Attraction and New Industries Fund to support emerging industries including battery manufacturing, green steel, cyber security and space
- $20 million towards the development of Aboriginal Tourism Fund to support initiatives in respect of development of new Aboriginal tourism experiences and the creation of employment opportunities for Aboriginal employment within the tourism industry
- $15 million allocation towards building local industry capacity to manufacture, refurbish or maintain iron ore railcar wagons
- $2 million the development of a wind turbine manufacturing industry in WA
Primary industries and regional development
- $15 million towards an Agriculture Climate Resilience Fund to assist WA farmers respond to the challenges of climate change
- $15 million towards enhancing biosecurity and emergency response
Mines, industry regulation and safety
- $4 million allocated over FY22 to FY25 to not-for-profit organisations for initiatives that seek to promote mental health in the workplace and connect workers to the best available help and support.
- $10 million allocated over FY22 to FY25 to an Exploration Incentive Scheme to stimulate increased resource exploration aimed at new mineral and energy discoveries
- $1.9 million spend (including $900,000 industry spend) over FY22 to FY25 to undertake research into the viability of local environmentally sustainable processing of WA iron ore to create green steel
- $1.7 million over FY22 to FY25 to work with local renewable manufacturers and the mining industry to accelerate transition to renewables on remote mine sites
Small business initiatives
- $59 million allocation to meet claims under the Small Business Lockdown Assistance Grants program
Prepare your business
If you have any questions about our State Budget analysis, or you would like to discuss how the Budget measures could impact you or your business, please contact your BDO adviser.